Thursday, July 9, 2009

Leaving Canadian Gas Out to Freeze

Not long ago, when peakers and technologically ignorant experts were lamenting America's gas fate, they pointed to Canada, where America was obtaining 15% of her gas, and her production decline.

How quickly things change. With new gas supplies, yanks are saying, "Thanks, but no thanks, hosers."

A new natural gas pipeline in the United States is allowing cheap gas from the Rockies to displace more than 10% of Canada’s gas exports to the Midwest United States, forcing more Canadian gas into storage and lowering natural gas prices for Canadian producers.

The 1,679 mile, $4.4 billion Rockies Express pipeline, or REX, is providing about 1.5 billion cubic feet per day (bcf/d) of cheap gas from the Rockies through the Midwest to Ohio. The latest section of REX just opened June 29 (

The new pipeline is displacing about 600 million cubic feet per day (mmcf/d) of Canadian production, says Jack Weixel, director of Energy Analysis for Bentek Energy. Bentek provides specialized energy pipeline information to clients in the oil and gas sector in North America. Weixel estimates the mid-continent corridor of pipelines send just over 5 bcf/d of gas, net, to the United States from Canada (some western Canadian gas goes back into Southern Ontario via Michigan).


Normally Canadian gas would flow through to the big consuming area of the US Northeast, but that market is having a lot less demand this year. Weixel says he sees slightly less Canadian gas being pushed off the grid in the fall, but adds that Canada needs to go find new markets for its gas.

“The US has solved its own problem, and we are less reliant on Canadian
gas. It’s still an important part, especially in the Northeast, but not so much for Midwest or California.” A new pipeline, called RUBY, is already being
planned to take Rockies gas to California -- another big market for Alberta gas,
Weixel says.

The Liquid Natural Gas export terminal from Kitimat, on the west coast of British Columbia, is a great idea for the Canadian industry he says. Alberta needs to do more to develop export markets for its natural gas.

Weixel adds,

“We could see US$2 gas (per mcf). It’s definitely possible. We haven’t seen the production declines down here yet. Rigs are dropping but they are more efficient
now. And the success rate is much higher in drilling wells into these new shale formations. (The production decline) is coming, but not as foretold as everybody
thought it would be.”

The displacement of Canadian gas imports was reported here earlier, plus the questionable need for the Alaska Natural Gas Pipeline (which carries an estimated price tag of $26 billion).

Amazing how quickly things change.

- Brewskie

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